5 - Modes of Entry, pre class slides Win11_1

5 - Modes of Entry, pre class slides Win11_1 - How to Go...

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How to Go Global pt. 1: Modes of Entry Lincoln Electric into India Session 5 – Prof. Robb Jensen
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Alternative Operating Modes for Foreign Market Expansion
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Exporting Conditions favoring Exporting Limited sales potential in target country; little product adaptation required Good available distribution channels; close to existing production plants High target country production costs Liberal import policies (low tariffs); high political risk Advantages Minimizes risk, investment Speed in entering market Maximizes scale, utilization of existing facilities Disadvantages Trade barriers, tariffs (5%+) Transportation costs Limits access to local information Company viewed as outsider
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Licensing/Contracting Conditions favoring Licensing/Contracting Import and investment barriers that increase cost, limit FDI (high tariffs) Institutional environment that secures legal protection Tangible or intangible assets can be fairly priced Low sales potential in target country; large cultural distance Licensee lacks ability/resources to become competitor Advantages Minimizes risk, investment Speed in entering market Able to circumvent trade barriers High return on investment; average license royalty was 8.5% of licensee revenues (2002). Disadvantages Lack control over use of assets Licensee may become competitor Potential for knowledge spillovers
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Arrangements Management contracts are means by which a company may transfer management talent to assist a foreign company for a specified period for a set fee Host country gets assistance without the FDI process
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This note was uploaded on 03/30/2012 for the course BUS M 490 taught by Professor Robbjense during the Winter '11 term at BYU.

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5 - Modes of Entry, pre class slides Win11_1 - How to Go...

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